How to Answer Activity-Based Costing Questions in ACCA PM
ABC questions in ACCA PM test whether you can assign overheads by activity and interpret the result. Here's the method plus the commentary examiners want.
Activity-based costing questions in ACCA PM ask you to assign overheads to products using cost drivers, then compare the result with traditional absorption costing. The calculation earns marks, but the interpretation is where stronger candidates pull ahead.
The ABC calculation steps
- Group overheads into cost pools by activity (setups, inspections, machine hours, orders).
- Identify the cost driver for each pool.
- Calculate a cost-driver rate: pool cost ÷ total driver volume.
- Charge overheads to each product based on its use of each driver.
- Add direct costs to get the full ABC cost per unit.
The commentary that scores
Once you have the ABC cost, compare it with the absorption-costing cost and explain the shift. Low-volume, complex products usually look more expensive under ABC because they consume disproportionate support activities; high-volume simple products often look cheaper.
- Explain why the costs have changed for this product using its driver usage.
- Discuss the pricing or product-mix decisions the new information supports.
- Note the practical limitations — the cost and effort of collecting driver data.
PM rewards accurate numbers and applied commentary together. Marking a full ABC answer against the official ACCA scheme with The 50% Club shows you which calculation and discussion marks you earned — including the own-figure marks that survive an arithmetic slip.